Petition for Writ of Certiorari — Progressive Lawn Managers, Inc., Petitioner v. Lawn Managers, Inc.
Supreme Court briefSep 28, 2020
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In The
Supreme Court of the United States
---------------------------------♦--------------------------------PROGRESSIVE LAWN MANAGERS, INC.,
Petitioner,
v.
LAWN MANAGERS, INC.,
Respondent.
---------------------------------♦--------------------------------On Petition For A Writ Of Certiorari
To The United States Court Of Appeals
For The Eighth Circuit
---------------------------------♦--------------------------------PETITION FOR A WRIT OF CERTIORARI
---------------------------------♦--------------------------------DON V. KELLY
Counsel of Record
ALEXANDER M. HURST
EVANS & DIXON, LLC
Metropolitan Square
211 North Broadway, Suite 2500
St. Louis, Missouri 63102
(314) 621-7755
dkelly@evans-dixon.com
ahurst@evans-dixon.com
Counsel for Petitioner
================================================================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
QUESTIONS PRESENTED
1. Whether in a trademark infringement case in
which it is necessary for the federal court to construe
state-court divorce orders governing the rights and
obligations of the parties relevant to unclean hands
and where there are ongoing parallel state-court proceedings involving enforcement of those same orders,
the federal court may disregard the state-court constructions of the divorce orders and contradictorily
construe such orders on the sole basis that the federal
case is a “trademark infringement action in federal
court.”
2. Whether in the situation where the licensor
of a mark purposefully allows the licensee to use the
mark to deceive the public into thinking the licensee is
the licensor and the licensor retains and exercises no
control over the quality of services provided under the
mark, the finding of mark abandonment compelled by
the Lanham Act may be avoided solely on the basis of
a prior relationship between the licensor and licensee,
even where that relationship turns hostile before and
during the license period.
ii
PARTIES TO THE PROCEEDING AND
CORPORATE DISCLOSURE STATEMENT
Petitioner is Progressive Lawn Managers, Inc.,
Defendant-Appellant below.
Respondent is Lawn Managers, Inc., PlaintiffAppellee below.
Petitioner Progressive Lawn Managers, Inc. has
no parent company. No publicly held company owns
10% or more of Progressive Lawn Managers, Inc.’s
stock.
RELATED PROCEEDINGS
The proceedings directly related to this petition are:
A. Lawn Managers, Inc. v. Progressive Lawn Managers, Inc., No. 18-2658, United States Court of Appeals
for the Eighth Circuit, opinion filed May 20, 2020, rehearing en banc denied June 29, 2020.
B. Lawn Managers, Inc. v. Progressive Lawn Managers, Inc., Case No. 4:16-cv-00144-DDN, United States
District Court for the Eastern District of Missouri.
Judgment Order entered by the District Court on June
11, 2018; Memorandum Opinion entered by the District Court on June 11, 2018; Supplemental Judgment
Order entered by the District Court on July 13, 2018;
Memorandum and Order Regarding Post-Judgment
Motions entered by the District Court on July 13, 2018;
and Memorandum and Order Awarding Attorney’s
Fees entered August 31, 2018.
iii
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ................................
i
PARTIES TO THE PROCEEDING AND CORPORATE DISCLOSURE STATEMENT ...........
ii
RELATED PROCEEDINGS ................................
ii
TABLE OF CONTENTS ......................................
iii
TABLE OF AUTHORITIES .................................
vi
OPINIONS BELOW.............................................
1
JURISDICTION ...................................................
1
STATUTORY PROVISIONS INVOLVED ...........
2
INTRODUCTION ................................................
2
A.
Deference to State-Court Rulings .............
3
B.
Abandonment by Naked Licensing ...........
6
STATEMENT .......................................................
7
A.
Factual Background ..................................
7
B.
Proceedings Below and in the State
Courts ........................................................ 11
REASONS FOR GRANTING THE PETITION ..... 20
A.
In Refusing to Give any Deference to the
State-Court Rulings on the Basis that this
Case is a “Trademark Infringement Action
in Federal Court,” The Eighth Circuit has
Manufactured a Dangerous, Lanham ActSpecific Carve-Out to the Rules of Decision Act and the Court’s Comity and Domestic Relations Jurisprudence ................ 20
iv
TABLE OF CONTENTS—Continued
Page
B.
The Eighth Circuit Has Effectively Excised the Doctrine of Abandonment by
Naked Licensing from the Lanham Act by
Excusing the Licensor’s Failure to Retain
Control over the Mark Based upon a Prior
Relationship ............................................... 27
CONCLUSION..................................................... 38
APPENDIX
Appendix A: Opinion of the United States
Court of Appeals for the Eighth Circuit (May
20, 2020) ..................................................................1a
Appendix B: Opinion of the United States District Court for the Eastern District of Missouri
(June 11, 2018) ......................................................33a
Appendix C: Supplemental Judgment Order of
the United States District Court for the Eastern District of Missouri (July 13, 2018) ...............57a
Appendix D: Order of the United States Court
of Appeals for the Eighth Circuit Denying Rehearing (June 29, 2020) ........................................62a
Appendix E: Opinion of the Missouri Court of
Appeals, Zweifel v. Zweifel, 595 S.W.3d 525
(January 28, 2020) ................................................63a
Appendix F: Order and Judgment of the Circuit Court of the 23rd Judicial Circuit, State
of Missouri, Zweifel v. Zweifel (November 20,
2018) ......................................................................86a
v
TABLE OF CONTENTS—Continued
Page
Appendix G: Order and Judgment of the Circuit Court of the 23rd Judicial Circuit, State
of Missouri, Zweifel v. Zweifel (August 24,
2020) ....................................................................126a
Appendix H: Relevant Statutory Provisions .......130a
Appendix I:
Complaint .........................................140a
vi
TABLE OF AUTHORITIES
Page
FEDERAL CASES
Allen v. McCurry, 449 U.S. 90 (1980) .........................27
Already, LLC v. Nike, Inc., 568 U.S. 85 (2013).... 30, 36, 37
Am. Broad. v. Wahl Co., 121 F.2d 412 (2d Cir.
1941) ..........................................................................6
Ankenbrandt v. Richards, 504 U.S. 689 (2013) ..........22
Barcamerica Int’l USA Tr. v. Tyfield Importers,
Inc., 289 F.3d 589 (9th Cir. 2002) ..... 28, 29, 33, 35, 36
Barry v. Mercein, 46 U.S. 103 (1847) ..........................24
Cmty. of Christ Copyright Corp. v. Devon Park
Restoration Branch of Jesus Christ’s Church,
634 F.3d 1005 (8th Cir. 2011) ..................................35
Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S.
1 (2004) ....................................................................24
Engle v. Isaac, 456 U.S. 107 (1982).............................22
Erie R. Co. v. Tompkins, 304 U.S. 64 (1938) ...............21
Eva’s Bridal Ltd. v. Halanick Enters., Inc., 639
F.3d 788 (7th Cir. 2011) ......................... 29, 31, 32, 37
FreecycleSunnyvale v. Freecycle Network, 626
F.3d 509 (9th Cir. 2010) ...........................................31
Gasperini v. Center for Humanities, Inc., 518
U.S. 415 (1996) ........................................................21
Heaton Distrib. Co. v. Union Tank Car Co., 387
F.2d 477 (8th Cir. 1967) ...........................................31
In re Burrus, 136 U.S. 586 (1890) ...............................24
vii
TABLE OF AUTHORITIES—Continued
Page
Island Insteel Systems, Inc. v. Waters, 296 F.3d
200 (3d Cir. 2002) ....................................................21
Juidice v. Vail, 430 U.S. 327 (1977) ............................26
Ky. Fried Chicken Corp. v. Diversified Packaging
Corp., 549 F.2d 368 (5th Cir. 1977) ............. 28, 35, 36
Lawn Managers, Inc. v. Progressive Lawn Managers, 959 F.3d 903 (8th Cir. 2020) ................. passim
Lexmark Int’l, Inc. v. Static Control Components,
Inc., 572 U.S. 118 (2014)..........................................32
Murray v. Carrier, 477 U.S. 478 (1986) ......................22
New Orleans Pub. Serv., Inc. v. Council of City of
New Orleans (NOPSI), 491 U.S. 350 (1989) ...........27
Santosky v. Kramer, 455 U.S. 745 (1982) ...................24
Stanfield v. Osborne Indus., Inc., 52 F.3d 867
(10th Cir. 1995).................................................. 32, 33
Stoner v. New York Life Ins. Co., 311 U.S. 464
(1940) ....................................................... 3, 21, 22, 25
Taco Cabana Int’l, Inc. v. Two Pesos, Inc., 932
F.2d 1113 (5th Cir. 1991) .........................................28
Terminiello v. City of Chicago, 337 U.S. 1
(1949) ....................................................... 3, 21, 22, 25
Tumblebus Inc. v. Cranmer, 399 F.3d 754 (6th
Cir. 2005) .................................................................30
U.S. v. Little Lake Misere Land Co., Inc., 412 U.S.
580 (1973) ................................................................21
viii
TABLE OF AUTHORITIES—Continued
Page
U.S. v. Windsor, 570 U.S. 744 (2013)................. 4, 22, 24
United States v. Yazell, 382 U.S. 341 (1966) ...............24
STATE CASES
Zweifel v. Zweifel, 595 S.W.3d 526 (Mo. App. E.D.
2020) ............................................................ 17, 18, 26
FEDERAL STATUTES
15 U.S.C. § 1055 ........................................................ 2, 6
15 U.S.C. § 1064 ........................................................ 2, 6
15 U.S.C. § 1127 ............................................ 2, 6, 30, 35
28 U.S.C. § 1652 ...................................................... 2, 21
TREATISES
3 J. McCarthy, Trademarks & Unfair Competition § 18:48 (4th ed. 2012) ................................ 30, 35
Restatement (Third) of Unfair Competition § 33
cmt. b (1995) ...................................................... 30, 31
1
PETITION FOR A WRIT OF CERTIORARI
Progressive Lawn Managers, Inc. (“Petitioner”) respectfully petitions for a writ of certiorari to review the
judgment of the United States Court of Appeals for the
Eighth Circuit.
---------------------------------♦---------------------------------
OPINIONS BELOW
The Eighth Circuit’s opinion affirming the judgment of the District Court is reported at 959 F.3d 903
(8th Cir. 2020). The Eighth Circuit’s order denying
panel rehearing and rehearing en banc is unreported.
The District Court opinion entering judgment in favor
of Respondent is reported at 390 F. Supp.3d 975 (E.D.
Mo. 2018).
---------------------------------♦---------------------------------
JURISDICTION
The Eighth Circuit entered judgment on May 20,
2020 (App.1a) and denied a timely rehearing petition
on June 29, 2020 (App.62a). Petitioner files this petition within 90 days of the order denying rehearing as
required by Supreme Court Rules 13.1 and 13.3, with
the time computed as stated in Rule 30.1. This Court’s
jurisdiction is invoked under 28 U.S.C. § 1254(1).
---------------------------------♦---------------------------------
2
STATUTORY PROVISIONS INVOLVED
The Lanham Act, 15 U.S.C. § 1055
The Lanham Act, 15 U.S.C. § 1064
The Lanham Act, 15 U.S.C. § 1127 (“abandonment”)
The Rules of Decision Act, 28 U.S.C. § 1652
These statutes are reproduced in their entirety in
the appendix to this petition. App.130a.
---------------------------------♦---------------------------------
INTRODUCTION
This case raises two questions of fundamental
importance concerning trademark law.
The first question requires balancing the principles of trademark law, federal court procedure, and
comity to state-court rulings. In particular, this case
asks the Court to examine whether a federal court in
adjudicating the issue of unclean hands in a Lanham
Act case may disregard state-court decisions interpreting state-court domestic relations orders, intended
to protect marital property awarded an ex-wife from
being raided by the ex-husband, and announce a construction of those divorce orders that directly contradicts the constructions issued by the state courts. Here
the Eighth Court determined it could because this case
is a “trademark infringement case in federal court” and
therefore the divorce orders could be regarded as mere
licenses.
3
The second question tests the limits of how reluctant federal courts may appropriately be to declare
abandonment as a result of “naked” licensing and specifically whether a trademark can still be valid if the
owner licenses that mark but neither imposes any contractual restrictions on how the mark is used, nor engages in any supervision of the licensee’s use of the
mark during the license, nor maintains any ongoing
business relationship with the licensee. In doing so,
this case asks the Court to examine whether naked licensing, a doctrine long part of the Lanham Act and
addressed by virtually every federal appellate court
over the span of decades, is a principle to be readily
enforced by federal courts in order to protect the public
from marketing deception or whether it is merely an
academic concept.
A. Deference to State-Court Rulings
The Rules of Decision Act ensures that the outcome of a federal court case will not materially differ
than if the case had been brought in state court. 28
U.S.C. § 1652. In addition, some 70 years ago, the Court
ruled that federal courts must defer to a state court’s
interpretation of its own law. Terminiello v. City of
Chicago, 337 U.S. 1, 4 (1949). In the context of diversity
cases, the Court has ruled that a federal court “must
follow the decisions of intermediate state courts in the
absence of convincing evidence that the highest court
of the state would decide differently.” Stoner v. New
York Life Ins. Co., 311 U.S. 464, 467 (1940). When federal cases involve issues of divorce, the Court has been
4
forcefully vocal in stating that when it comes to matters of domestic relations, state courts have primacy
and federal courts should accord state-court rulings
the highest level of respect. See, e.g., U.S. v. Windsor,
570 U.S. 744, 766–67 (2013).
On the issue of unclean hands in this case, the
terms of two Missouri divorce orders (“Divorce Orders”) are critical. Since 2016, there have been ongoing
enforcement proceedings against the ex-husband in
Missouri state courts for violating the Divorce Orders
through his operation of Respondent. Those proceedings have resulted in judicial constructions of the Divorce Orders which are critical to Petitioner’s unclean
hands defense. However, both the District Court and
Eighth Circuit not only refused to defer to the statecourt rulings, but they refused to acknowledge or mention them. Instead, both courts reached interpretations
of the Divorce Orders that are remarkable, both in
their brevity and in their conflict with the state-court
rulings. The constructions of the Divorce Orders here
are at odds with the Rules of Decision Act and the
Court’s jurisprudence on federal-state comity and the
primacy of state-court superintendence over divorce
matters.
The Eighth Circuit gave no express basis for its
disregard of the Divorce Orders other than to state in
a footnote:
Progressive’s contrary argument—to which it
devotes much of its brief—that the accounts
divided in § 5.02 constituted marital property
5
and therefore could never be solicited again,
misapprehends that this is a trademark infringement action in federal court, and that
its unclean hands defense turns on the language of the licensing agreement before us.
Lawn Managers, Inc. v. Progressive Lawn Managers,
959 F.3d 903, 913, n.5 (8th Cir. 2020).
With one unsupported footnote, the Eighth Circuit
completely unmoored the terms under consideration
from their origin in a state-court divorce decree and
ostensibly freed itself to contradict the state-court’s
interpretation of its own order. Such superficial treatment of a state court ignores the rules of deference
housed in the Rules of Decision Act and the Court’s
comity and domestic relations jurisprudence.
Thus, it mattered not to the Eighth Circuit that
the provisions at issue were by their terms “decretal”
and “non-modifiable” marital property provisions or
that the state court, in lengthy decisions, had adjudged
the ex-husband of multiply violating the provisions. By
the Eighth Circuit’s rationale, it and the District Court
owed absolutely no deference to the decisions rendered
in the parallel state divorce-court proceedings—despite the fact that the state circuit court was interpreting its own orders. With this announcement, the
Eighth Circuit has imbued the Lanham Act with an
exalted status over the Rules of Decision Act that: a)
removes any requirement of comity in federal subject
matter jurisdiction cases; b) creates a dangerous and
ill-defined carve-out to this Court’s domestic relations
6
jurisprudence; and c) genuinely opens the door for collateral attack on state-court rulings in federal court.
B. Abandonment by Naked Licensing
The Lanham Act, 15 U.S.C. § 1064, provides that a
trademark registration may be cancelled because the
trademark has been “abandoned.” “Abandoned” is defined in 15 U.S.C. § 1127 to include any act or omission
by the registrant that causes the trademark to lose
its significance as an indication of origin. Before the
Lanham Act was enacted, the doctrine of abandonment
by transfer “in gross” (in modern terms, a “naked license”) was judicially recognized. See Am. Broad. v.
Wahl Co., 121 F.2d 412, 413–14 (2d Cir. 1941). The
Lanham Act incorporated this doctrine into its provisions. 15 U.S.C. § 1055 provides (with emphasis supplied):
Where a registered mark or a mark sought to
be registered is or may be used legitimately by
related companies, such use shall inure to the
benefit of the registrant or applicant for registration, and such use shall not affect the validity of such mark or of its registration,
provided such mark is not used in such manner as to deceive the public.
Here, although the Eighth Circuit acknowledged
that naked licensing will result “when a trademark
owner licenses a mark without exercising sufficient
quality control over the services provided under the
mark” and that Respondent neither imposed any contractual rights to control nor had the ability to control
7
the quality of Petitioner’s services, it nevertheless
concluded that no naked licensing occurred based on
the notion that Respondent could reasonably rely on
Petitioner’s own, undisclosed quality-control measures
because the parties previously had a “special relationship.” Lawn Managers, Inc., 959 F.3d at 911. As the dissenting opinion forcefully demonstrates, the majority
ruling conflicts with the holdings of other circuits. In
fact, the dissent notes that though a close working relationship may sometimes substitute for formal controls, this case is the only circuit-court opinion to
ever hold that a prior working relationship alone,
without ongoing controls on the licensee’s quality, is
sufficient to overcome naked licensing. The dissent
below is clearly correct. The Eighth Circuit’s unprecedented ruling goes too far and effectively excises the
doctrine of abandonment by naked licensing from the
Lanham Act.
---------------------------------♦---------------------------------
STATEMENT
A. FACTUAL BACKGROUND
Randy Zweifel (“Randy”) and Linda Smith (“Linda”)
married in 1993 and divorced in 2012. A611; A1993.1 As
a married couple, they each owned half of Respondent,
1
Citations to the trial transcript appear in the following volume, page and line number format: “1T(40:7).” Citations to the
appendix filed in the Court of Appeals appear in the format of
“A111.” Citations to pages of the Appendix included with this
Petition appear in the format of “App.11a.”
8
Lawn Managers, Inc., a St. Louis-area lawn-care company. A611.
To settle their divorce, Linda and Randy arrived
at an agreed division of marital property. A1993. They
set forth their agreement in a 28-page “decretal” and
non-modifiable marital settlement agreement (the
“MSA”) that the Circuit Court for Jefferson County,
Missouri, incorporated into a 2012 dissolution decree
(the “2012 Decree”). A611–12.
The MSA required Linda to relinquish her share
of Respondent. Ex. 11(§5.01). However, instead of
Randy paying Linda money for her relinquished share,
the MSA partitioned Respondent’s tangible assets and
customers. A613–14. The MSA allocated the customers
by zip code, giving customers in one group of zip
codes to Randy and customers in another group of
zip codes to Linda. A613–14. The MSA provided that
Linda could form a company, called “Progressive Lawn
Managers,” to service her awarded customers.2
Ex.11(§5.06).
In allocating customers, section 5.02(2) of the MSA
used specific language that Linda was receiving “all
right, title and interest” to the customers of her specified zip codes. Ex. 11(§5.02(1)). The award of specific
customers was not subject to any type of term limitation and, in fact, section 5.06 of the MSA stated that if
Randy or Linda wished to sell any awarded customer
he or she must give the other the first right to purchase
2
Petitioner Progressive Lawn Managers, Inc. is that company. A611.
9
the customer. A615; Ex. 11(§5.06). In addition to the
award of specific customers, the MSA added the requirement that the parties not solicit any business (not
just the awarded customers) in the zip codes awarded
to the other for two years. Ex. 11(§5.06).
Though the MSA provided that Linda’s new lawn
care company would be formally called “Progressive
Lawn Managers, Inc.,” it specifically provided that
for two years after the divorce, Linda’s business
could use Respondent’s name, “Lawn Managers,” when
doing business with the public or seeking credit. Ex.
11(§5.06). The MSA did not require the parties to notify the public that Linda’s company would now be using the name “Lawn Managers” or that Linda’s “Lawn
Managers” company was not Randy’s “Lawn Managers” company. Ex. 11. Nor did the MSA provide for what
the parties were to tell customers about the division of
accounts. Ex. 11. The MSA lacked any terms regulating
how Linda could use the name “Progressive Lawn
Managers.” Ex. 11. The MSA also lacked terms giving
Randy the right to control or evaluate how Linda used
the “Lawn Managers” name or the services rendered
under that name. Ex. 11.
In furtherance of the terms of the MSA, a transfer
of customer accounts from Respondent to Petitioner
took place on April 25, 2012. By design, the customers
were transferred from Respondent to Petitioner without their knowledge. 2T(5:19–6:18). As a result of the
2012 Decree, there were now two St. Louis-area lawn
companies using the name “Lawn Managers.”
1T(114:17–115:10). Petitioner’s employees worked in
10
the field wearing the same uniforms bearing the “Lawn
Managers” name as used by Respondent’s employees
until the end of 2014. 1T(114:7–16). Likewise, the parties were both using similar vehicles with similar, and
in some cases identical, “Lawn Managers” signage on
them. 1T(69:4–8).
Though the 2012 Decree signaled the end of Linda
and Randy’s marriage, it did not mark the end of their
discord. In July 2013, Linda received a contempt judgment of $75,000.00 against Randy for failing to pay
sums owed under the 2012 Decree. Shortly thereafter,
Linda filed a second contempt motion to recover additional unpaid sums and for Randy’s alleged misappropriation of customers specifically awarded under the
2012 Decree. A673. Linda and Randy settled those allegations, which settlement was expressed in a July
25, 2014 Order (the “2014 Order”). Ex. 12. That order
required Randy to pay Linda $125,000.00 and ordered
him to transfer customers in two more zip codes to
Linda. A616.
The 2014 Order also included a provision, the
meaning of which has critical importance to both this
case and to later contempt proceedings in the state
court. In this regard, whereas Section 5.06 of the MSA
prohibited the parties from the soliciting of new (as opposed to existing) residential customers in the allocated zip codes, the 2014 Order revised the MSA’s
prohibition to forbid any servicing of new residential
accounts in those zip codes and extended that prohibition to July 25, 2016. A616. The 2014 Order also extended Linda’s right to use the name “Lawn Managers”
11
for her business until December 31, 2014 and restated
her right to use the name “Progressive Lawn Managers, Inc.” A616; Ex. 12. The 2014 Order concluded by
stating that all other terms of the 2012 Decree would
remain in effect. Ex. 12.
The customers transferred by the 2014 Order were
transferred without their knowledge. 1T(207:18–21).
Similarly, there was nothing in the 2014 Order that required the parties to notify the public that customers
had been transferred to Linda or that gave Respondent
the right to control the use of the “Lawn Managers”
name by Linda. Ex. 12.
B. Proceedings Below and in the State Courts
Respondent instituted this case under 15 U.S.C.
§§ 1051, et seq., and against Petitioner in February
2016, alleging that Petitioner was infringing Respondent’s federal trademark rights in that it used the twoword name “Lawn Managers” after the license expired
in 2014. In its Complaint Respondent also openly collaterally attacked the Divorce Orders by alleging that
Petitioner’s use of the name “Progressive Lawn Managers” was an infringement of its rights and requested
the District Court bar Petitioner from using any name
using the words “Lawn Managers.” App.146a-148a. Petitioner answered the Complaint raising certain affirmative defenses, namely the binding effect of the
Divorce Orders and Respondent’s unclean hands in
violating those orders by servicing and soliciting Petitioner’s customers. A36.
12
Six months after Respondent filed this case, Respondent sent mailers, entitled “We Want You Back,” to
the customers that had been specifically awarded
Linda by the Divorce Orders as marital property by
Section 5.02 of the MSA.3 A2188(2–9); Ex. 51. Asserting this conduct to be a breach of the Divorce Orders,
Linda filed a third motion for contempt against Randy
in state court.
On September 1, 2016, the state court held a hearing on Linda’s request for a restraining order in connection with the motion for contempt. At the hearing,
Randy defended his actions in soliciting the specifically
awarded customers with the defense that the 2012
Decree and 2014 Order allowed him to solicit any customers after July 25, 2016. Specifically, Randy argued
that although Section 5.02 allocated “all right, title and
interest” in certain customers to Linda, Section 5.06 of
the MSA provided a two-year limitation (later extended to July 25, 2016 by the 2014 Order) on nonsolicitation. Linda counter-argued that by the terms of
the MSA and the 2014 Order, only new customers (and
not the specifically awarded customers) could be solicited in her zip codes after July 25, 2016. As to those
specifically awarded customers, the terms of Sections
5.02 and 5.06 indicated that those customers were allocated marital property not subject to solicitation by
Respondent.
3
Respondent’s solicitation had an immediate effect: hundreds of Petitioner’s customers cancelled, causing a precipitous
drop in revenue. 3T(19:5–20:3).
13
After hearing arguments and testimony regarding
the terms of the Divorce Orders, the Circuit Court of
Jefferson County, Missouri, restrained Randy from soliciting or servicing the customers awarded to Linda by
those orders. A454. In reaching this decision, the statecourt judge compared the language of Sections 5.02
and 5.06 of the MSA and determined that Section 5.02
effected “a division of property” and the two-year nonsolicitation period applied only to “new business with
those zip codes.” (A2308-2311). On November 18, 2016,
after a hearing on a preliminary injunction, the state
court maintained its previous construction of the MSA
and ordered the conversion of its temporary restraining order (“TRO”) against Randy into a preliminary injunction. A458. Respondent was thus prohibited from
soliciting or servicing the customers awarded Linda in
2012 and 2014 during the pendency of the contempt
proceedings. A458; 1T(61:5–15).
In December 2016, Petitioner alerted the District
Court to the parallel state-court enforcement proceedings and provided a copy of the transcript from the
state-court TRO hearing. A59–A204. After a supplemental case-management conference (A205; A252), the
District Court entered an order staying the case pending resolution of the contempt proceedings. A243. Respondent moved for reconsideration of the stay order
asserting that there was no overlap of issues between
the proceedings and that the question whether Randy
could solicit the customers awarded by the Divorce
Orders was “not in any way before” the District Court.
14
A272, A340-41. The District Court vacated the stay on
March 10, 2017. A390.
The case went to trial on October 30, 2017. In support of the defense of unclean hands, the evidence
indicated that at the time of the July 2014 Order, Respondent had been servicing accounts that had been
awarded Linda in 2012. 2T(144:17–22). After July
2014, Respondent continued servicing those customers.
1T(118:22–25). As for the solicitation of specificallyawarded customers after July 25, 2016, Petitioner submitted the transcript from the August 31, 2016 TRO
hearing wherein Randy admitted soliciting those customers and the state-court judge explained how he
interpreted the Divorce Orders and why he was entering a restraining order.4
After trial, the District Court requested proposed
findings of fact and conclusions of law. Prior to the
deadline for the proposed findings and conclusions,
Petitioner filed with the District Court the just-issued
24-page summary judgment ruling from the Missouri
state court rejecting Randy’s argument that he was
permitted to solicit the awarded customers after July
25, 2016. A660. The state court noted in its ruling that
the time limits set out in the Divorce Orders “clearly
and unambiguously” applied to soliciting “new business”—not the specifically awarded customers. A684.
The state court further found that the customers
4
By virtue of summary judgment motions, the District Court
already had the state court’s TRO ruling and preliminary injunction. A434–38.
15
awarded pursuant to the MSA were marital property
“not subject to modification,” A683, meaning that
Randy could not freely solicit and service those particular customers after July 25, 2016.
While waiting for the District Court to issue its
ruling in this case, trial began on Linda’s pending contempt motion. Shortly after that trial ended, but before
a judgment on that case issued, the District Court in
this case issued its ruling on June 11, 2018. A862;
A846. The court adjudged Petitioner guilty of willful
infringement of Respondent’s mark. A854–58. In ruling on Petitioner’s defense of unclean hands, the District Court came up with its own construction of the
Divorce Orders, which construction took only a few
sentences to express:
Rather than any such indicator of perpetual
intent, both the 2012 divorce decree and the
2014 Judgment expressly limited the nonsolicitation and non-compete provisions to a
term of years. Accordingly, Respondent was
entitled to renew advertising to customers following the expiration of the 2014 Judgment’s
non-compete provision in July 2016, and this
advertisement did not sully Respondent’s
hands in a suit for trademark infringement.
A859.
The District Court cited no specific terms of the
Divorce Orders or testimony that supported its conclusion. More glaringly, the ruling made no mention of the
previous state-court rulings, even though the court no
doubt knew its ruling would be used to interfere with
16
those proceedings.5 As part of its judgment, the District
Court awarded damages and attorneys’ fees against
Petitioner. The District Court also awarded injunctive
relief and in doing so effectively modified the Divorce
Orders by setting forth requirements on how Petitioner could use the name “Progressive Lawn Managers.” See App.57a.
Petitioner appealed to the Eighth Circuit. A1312.
On November 20, 2018 and just before Petitioner’s reply brief was due, the state court issued its 30-page
Judgment and Order on Linda’s third motion for contempt.6 App.86a. The ruling determined that in the
context of a dissolution, customer lists, customer accounts, and accounts receivable are marital property.
In follow up to this determination, the state court
again ruled that the Divorce Orders allowed Linda and
Randy to solicit new customers in the zip codes, but
not the customers that were specifically awarded.
App.117a-120a. Thus, the state court held that the language of the Divorce Orders prohibited exactly what
Lawn Managers did in July 2016—solicit customers
specifically awarded as property to Linda. App.118a120a. Further, with respect to conduct before July
2016, the state court found that leading up to the 2014
Order, Randy failed to disclose information to Linda as
5
The court began its judgment with the statement that nothing in its ruling was intended to affect the state-court proceedings. Nevertheless, Randy filed the District Court’s ruling in state
court and argued that ruling bound the state court.
6
The state-court judgment also contained a disclaimer that
nothing in it was intended to interfere with the determinations in
this case.
17
to the extent of his violation of the 2012 Decree.
App.114a-115a. As a result of these violations of the
Divorce Orders, the state court determined that Randy
had damaged Linda in the amount of $415,381.72.
App.123a. Petitioner reported this ruling to the Eighth
Circuit in its reply brief. Meanwhile, Randy appealed
the state-court ruling to the Missouri Court of Appeals.
That appeal meant there were now parallel state and
federal proceedings at the appellate level involving
construction of the same provisions of the state-court
Divorce Orders.
The Missouri Court of Appeals reached its decision
first on January 28, 2020. Zweifel v. Zweifel, 595 S.W.3d
526 (Mo. App. 2020). The Missouri appeals court dealt
first with Randy’s assertion that the District Court’s
ruling in this case conclusively determined the meaning of the MSA in state court. The court rejected this
assertion. Zweifel, 595 S.W.2d at 533. The court then
dealt with the propriety of a finding of contempt
against Randy. As to this point, the court observed
that, from a contempt standpoint, the language of sections 5.02 and 5.06 was not specific enough to serve as
the basis for a contempt finding. Zweifel, 595 S.W.2d at
536. Of note, in evaluating the propriety of contempt,
the Missouri Court of Appeals expressly determined
that the provisions at issue were not “unambiguous.”
Id. at 535.
The Missouri Court of Appeals added, however,
that it was not finding the state trial court’s interpretation of the Divorce Orders incorrect, only that the
language of the decrees was not forceful enough for
18
contempt enforcement. In this respect, the Missouri
Court of Appeals stated:
[W]e do not conclude that Zweifel’s conduct
was permissible under the 2012 MSA and
Judgment or the 2014 Settlement and Judgment—only that the judgments are too vague
for the trial court to have determined that the
conduct was contemptuous.
Zweifel, 595 S.W.3d at 536.
Importantly, the Missouri Court of Appeals refused to set aside the preliminary injunction entered
against Randy stating:
But we have not made any definitive conclusions about the meaning of the 2012 MSA and
Judgment or the 2014 Settlement and Judgment. Again, our conclusion is that those
judgments were not clear as to the parties’ obligations and restrictions regarding the existing residential customers awarded to each
of them. While this conclusion means that
Zweifel cannot be held in contempt of the 2012
MSA and Judgment or the 2014 Settlement
and Judgment, that is not the same as a dispositive holding that his conduct was permissible under those judgments. Zweifel has not
cited any authority that would support deeming the preliminary injunction improvident
and dissolving it under these circumstances.
Id. at 537 (emphasis supplied).
The Missouri Court of Appeals remanded the case
to the state trial court for proceedings consistent with
19
its decision. Petitioner informed the Eighth Circuit
Court of Appeals of the Missouri Court of Appeals’ ruling on January 31, 2020. In a split-panel ruling filed
on May 20, 2020, the Eighth Circuit Court of Appeals
affirmed the finding of infringement against Petitioner
and affirmed the District Court’s ruling on Petitioner’s
unclean hands defense. As to the interpretation of the
Divorce Orders, the Eighth Circuit panel stated, in
terse fashion, “there is no relevant ambiguity in the licensing agreement and that Lawn Managers was permitted to send the ‘We Want You Back’ mailer in July
2016.” Lawn Managers, Inc. v. Progressive Lawn Managers, 959 F.3d 903, 912 (8th Cir. 2020). The panel’s
opinion made no reference to any of the state-court rulings or that the Missouri Court of Appeals had adjudged the provisions at issue ambiguous. Instead, in
a remarkably candid footnote, the panel admitted its
lack of concern that the provisions at issue were part
of a marital property award in a divorce decree:
Progressive’s contrary argument—to which it
devotes much of its brief—that the accounts
divided in § 5.02 constituted marital property
and therefore could never be solicited again,
misapprehends that this is a trademark infringement action in federal court, and that its
unclean hands defense turns on the language
of the licensing agreement before us.
Id. at 913, n.5 (emphasis supplied).
On June 29, 2020, the Court of Appeals denied
panel and en banc rehearing.
20
On August 24, 2020, the state trial court, in reliance on the Missouri Court of Appeals’ finding that the
Divorce Orders were ambiguous for contempt purposes, set aside the previous judgment of contempt
against Randy. App.126a. Notably, this ruling did not
determine that Randy did not violate the Divorce Orders. As of the date of the filing of this petition, additional proceedings in the state court case remain
pending—in particular Linda’s motion to amend the
judgment to reflect that, though a contempt finding
may not persist, the August 24, 2020 ruling should be
amended, using the guidance from the Missouri Court
of Appeals, to include the determinations of the previous judgment of November 20, 2018 finding Randy to
have breached the Divorce Orders.
---------------------------------♦---------------------------------
REASONS FOR GRANTING THE PETITION
A. In Refusing to Give any Deference to the
State-Court Rulings on the Basis that this
Case is a “Trademark Infringement Action
in Federal Court,” The Eighth Circuit has
Manufactured a Dangerous, Lanham ActSpecific Carve-Out to the Rules of Decision
Act and the Court’s Comity and Domestic
Relations Jurisprudence.
The Rules of Decision Act states:
The laws of the several states, except where
the Constitution or treaties of the United
States or Acts of Congress otherwise require
or provide, shall be regarded as rules of
21
decision in civil actions in the courts of the
United States, in cases where they apply.
28 U.S.C. § 1652. This statute, though not facially limited to diversity cases, is often discussed in the context
of Erie R. Co. v. Tompkins, 304 U.S. 64 (1938). See, e.g.,
Gasperini v. Center for Humanities, Inc., 518 U.S. 415,
427 (1996); U.S. v. Little Lake Misere Land Co., Inc., 412
U.S. 580, 591 (1973). However, the statute has been applied in federal-question cases as well. See, e.g., Island
Insteel Systems, Inc. v. Waters, 296 F.3d 200, 208, n. 3
(3d Cir. 2002).
In addition to the Rules of Decision Act, long ago
the Court ruled that federal courts must defer to a
state court’s interpretation of its own law. Terminiello,
337 U.S. at 4. Also, the law has been long and deeply
settled that a federal court sitting in diversity must
apply the law of the state governing the case at issue.
Erie, 304 U.S. at 78. Two years after Erie, the Court
fortified the ruling of that case and held that a federal
court “must follow the decisions of intermediate state
courts in the absence of convincing evidence that the
highest court of the state would decide differently.”
Stoner v. New York Life Ins. Co., 311 U.S. 464, 467
(1940). In view of Terminiello, Stoner, and the Rules of
Decision Act, the idea that, because this case is a federal trademark case, the Eighth Circuit had the absolute right to interpret the Divorce Orders in obvious
disregard and contradiction of relevant state-court
rulings is immediately suspect.
The law of Terminiello and Stoner has remained
unchanged, and since their pronouncement, federal
22
courts consistently have relied on the law-of-the-case
doctrine. In addition to the directives of Terminiello
and Stoner, principles of comity require federal courts
to defer to a state’s judgment on issues of state law and,
more particularly, on issues of state procedural law.
Engle v. Isaac, 456 U.S. 107, 128–29 (1982); Murray v.
Carrier, 477 U.S. 478, 491 (1986). These principles apply particularly strongly in the context of issues implicating divorce. On this exact point, this Court has
remarked that when it comes to matters of domestic
relations, federal courts should accord state-court rulings the highest level of respect. Windsor, 570 U.S. at
766 (“[T]he federal courts, as a general rule, do not adjudicate issues of marital status even when there might
otherwise be a basis for federal jurisdiction.”) (citing
Ankenbrandt v. Richards, 504 U.S. 689, 703 (2013)).
Critically, the holdings of Terminiello and Stoner
do not mean that in a federal subject-matter case federal courts may wholly disregard on-point state-court
rulings. Yet, it is abundantly clear from the Eighth Circuit’s opinion that it deemed the federal trademark
questions of this case as a talisman that disencumbered it from this Court’s long-established directives
requiring deference to state courts to the point that it
could ignore not just any state court ruling—but the
ruling of the state court that originally entered the
order. Nowhere in this Court’s jurisprudence is it remotely suggested that such a dangerous and powerful
talisman exists.
Here, though the underlying case is a federal
trademark case, the determination of whether a
23
violation of the Divorce Orders occurred did not involve
a question of federal law. The state-court decisions (appellate and trial court) were determinations of state
law, and even more narrowly, determinations of the
meanings of court orders. As such, the rulings should
have been given deference by federal courts.
Unquestionably, the idea that case-critical statecourt rulings deserve no deference in a “trademark action in federal court” constitutes a dangerous and insupportable carve-out to this Court’s pronouncements
on comity between state and federal courts. Rare must
be the circumstances in which a federal court is free to
ignore state-court decisions interpreting state-court
orders. Concluding otherwise works a tear-down of the
Rules of Decision Act and the decades of jurisprudence
requiring comity between state and federal courts.
Further, by ignoring the state-court rulings and
the fact that the provisions here were not just a license,
but a division of marital property, the Eighth Circuit’s
ruling does immense violence to the concept of spousal
rights. In this respect, if the Eighth Circuit’s interpretation of the Divorce Orders were correct, it means that
in 2012 Linda effectively relinquished her 50% share
of Respondent solely in exchange for a promise by
Randy to defer soliciting her awarded customers for a
mere two years. The absurdity of that conclusion was
entirely lost on the Eighth Circuit because, this case
being a “trademark infringement action in federal
court,” it could casually treat the Divorce Orders as
mere licenses with no “marital property” concerns.
24
The Court’s domestic relations jurisprudence certainly does not countenance the manner in which the
Eighth Circuit and District Court treated the Divorce
Orders and ignored the state court proceedings. Not
just in the Windsor case, but in legions of other cases,
the Court has strongly proclaimed that federal courts
owe a heightened duty to avoid acting in cases in a
manner that may conflict or interfere with state-court
domestic cases. See, e.g., Elk Grove Unified Sch. Dist. v.
Newdow, 542 U.S. 1, 13 (2004) (“Thus, while rare instances arise in which it is necessary to answer a substantial federal question that transcends or exists
apart from the family law issue . . . in general it is appropriate for the federal courts to leave delicate issues
of domestic relations to the state courts.”); Santosky v.
Kramer, 455 U.S. 745, 771 (1982) (Rehnquist, J., dissenting) (“Throughout this experience the Court has
scrupulously refrained from interfering with state answers to domestic relations questions.”); United States
v. Yazell, 382 U.S. 341, 352 (“Both theory and the precedents of this Court teach us solicitude for state interests, particularly in the field of family and familyproperty arrangements. They should be overridden by
the federal courts only where clear and substantial interests of the National Government, which cannot be
served consistently with respect for such state interests, will suffer major damage if the state law is applied.”); In re Burrus, 136 U.S. 586, 593–94 (1890) (“The
whole subject of the domestic relations of husband and
wife, parent and child, belongs to the laws of the states,
and not to the laws of the United States.”); Barry v.
Mercein, 46 U.S. 103, 115 (1847) (“All questions arising
25
out of the domestic relations are peculiarly and appropriately within the province of the State governments;
and the court will be slow in countenancing any principle, or giving any construction of the constitution and
laws that shall decree to itself this branch of local authority.”).
Here the Missouri Court of Appeals found the operative language of the Divorce Orders ambiguous.7
In the face of this determination, the Eighth Circuit’s
summary assertion of there being no “relevant ambiguity” in the text of the MSA begs credulity. Likewise,
the Eighth Circuit’s determination that under the
MSA and 2014 Order Respondent could freely solicit
specifically awarded customers after July 2016 flatly
conflicts with the extensive proceedings before, and
lengthy rulings produced by, the Circuit Court of Jefferson County, Missouri.8
By categorizing the case as simply a federal trademark matter, the Eighth Circuit gave itself carte
blanche to ignore precedent of the Court and announce
an interpretation of the Divorce Orders that conflicted
with that of the state courts charged with enforcing
7
A determination which Terminiello and Stoner would indicate should be conclusive.
8
Notably, even though the latest ruling from the state trial
court sets aside the contempt finding, the preceding interpretations of the Divorce Orders by the trial court in favor of Linda and
its determination that those Orders violated by Randy have never
been overturned. In fact, the Missouri Court of Appeals went out
of its way to point out that it was not deciding that those interpretations were incorrect.
26
those decrees. The end result is not just that the federal court rulings are in conflict with the state-court
interpretations of state-court orders, but the refusal of
the federal District Court to defer to the state-court
determinations led to the absurd situation in which
Randy argued at both levels in state court that the
Missouri courts charged by state law with enforcing
those orders were bound by a contradictory interpretation of those orders issued by a federal court. Zweifel,
595 S.W.3d at 531. The tail was allowed to wag the dog,
which is precisely what this Court’s precedents
strongly caution against, especially in the domestic relations arena.
If, as the Court has observed, “federal-court interference with the State’s [civil] contempt process is an
offense to the State’s interest,” it follows that a federal
court that knowingly contradicts a state court’s interpretation of its own order in an ongoing contempt proceeding should be expected to at least provide a
rationale for doing so. Juidice v. Vail, 430 U.S. 327, 336
(1977). That was not done here.
The bottom line is that there is no “hall pass” in
federal-question cases, particularly not under the Lanham Act, that allows a federal court to deviate from the
Rules of Decision Act and the Court’s pronouncements
on comity and domestic relations. The same principles
underlying the statutory requirement that federal
courts recognize preclusion from final state-court decisions as a matter of full faith and credit support according deference in federal-question cases even when
collateral estoppel may not apply, namely to “foster
27
reliance on adjudication” by preventing inconsistent
decisions and “also promote the comity between state
and federal courts that has been recognized as a bulwark of the federal system.” Allen v. McCurry, 449 U.S.
90, 95-96 (1980). At minimum, the determinations of
the Missouri state courts deserved consideration and
deference. New Orleans Pub. Serv., Inc. v. Council of
City of New Orleans (NOPSI), 491 U.S. 350, 367–68
(1989); Juidice, 430 U.S. at 336. Nothing in the Court’s
jurisprudence supports the notion that, because this is
a federal trademark case, principles of comity do not
apply.
B. The Eighth Circuit Has Effectively Excised
the Doctrine of Abandonment by Naked Licensing from the Lanham Act by Excusing
the Licensor’s Failure to Retain Control over
the Mark Based upon a Prior Relationship.
“This is the first time a court has approved a license without an ongoing relationship to monitor and
prevent misleading uses of the mark.” Lawn Managers,
Inc. v. Progressive Lawn Managers, Inc., 959 F.3d 903,
915 (8th Cir. 2020) (Kobes, J., dissenting). The Eighth
Circuit, in going to great lengths to avoid the conclusion
that Respondent granted an uncontrolled license—and
therefore abandoned its mark—has reached a novel
conclusion of law that is not supported by any of the
myriad precedents on the doctrine of naked licensing.
Specifically, it is undisputed that Linda, as the licensee, was not subject to any contractual restrictions
28
on the quality of services that Petitioner delivered under the licensed mark, nor did Respondent exert any
control over use of the mark, unless one could call occasional incidental observation of serviced lawns
“control.” Lawn Managers, Inc. v. Progressive Lawn
Managers, Inc., 959 F.3d 903, 909–11 (8th Cir. 2020).
Nevertheless, the Circuit Court upheld the trial court’s
determination that a past working relationship between the parties that had turned adversarial was
sufficient to ensure that the parties employed uniform
quality standards, reasoning that Petitioner did not
overcome a “stringent standard” to prove abandonment via naked licensing. This supposedly astronomical burden of proof is an alien concept that contorts the
precedent on this matter to its breaking point.
The “stringent” standard stems from a line of
cases that is not nearly as strict as the Circuit Court
suggests. See Taco Cabana Int’l, Inc. v. Two Pesos, Inc.,
932 F.2d 1113, 1121 (5th Cir. 1991) (finding a lack of
naked licensing in the context where there was a “record of at least some bilateral quality monitoring”); Ky.
Fried Chicken Corp. v. Diversified Packaging Corp., 549
F.2d 368, 387 (5th Cir. 1977) (describing a “heavy” burden of proof to establish forfeiture and finding no such
forfeiture had occurred in the context of fast-food franchises). The Eighth Circuit also cites Barcamerica Int’l
USA Tr. v. Tyfield Importers, Inc., 289 F.3d 589, 596
(9th Cir. 2002), in resting its conclusion that Petitioner
did not meet the stringent standard of proving involuntary abandonment by granting the uncontrolled
license to Petitioner. Yet the court in Barcamerica,
29
despite describing the relevant standard as “stringent,” found that the holder of the mark had abandoned it via naked licensing because there was no
demonstration of “any ongoing effort to monitor quality.” Barcamerica, 289 F.3d at 597 (finding informal
wine tastings were not a sufficient means of quality
control for a vintner to its licensee). “What matters is
that [the mark holder] played no meaningful role in
holding the [product] to a standard of quality.” Id. at
598.
The Circuit Court below appears to recognize that,
like in Barcamerica, there was no ongoing effort to
monitor quality in this case, and the dissent aptly concluded that “Progressive did more than show Lawn
Managers’s [sic] lacked sufficient control, it proved the
‘extreme case’ where the licensor had none.” Lawn
Managers, 959 F.3d at 916 (Kobes, J., dissenting) (citing Eva’s Bridal Ltd. v. Halanick Enters., Inc., 639 F.3d
788, 791 (7th Cir. 2011)). Nevertheless, the majority below found that no abandonment occurred, suggesting
the standard it used was not so much the “stringent”
one described in Barcamerica, but rather something
entirely novel, far more austere, and ultimately insurmountable.
So entrenched is the Eighth Circuit’s reluctance to
declare abandonment by naked licensing that it manufactured an untenably high standard to avoid the
conclusion that Respondent abandoned the “Lawn
Managers” mark—effectively rewriting the Lanham
Act in the process. To uphold this ascetic restraint
from judicially decreed abandonment would herald a
30
significant upheaval of the status quo and create a circuit split by effecting a de facto abrogation of the wellsettled doctrine of involuntary abandonment through
naked licensing. See 15 U.S.C. § 1127 (defining “abandonment” in part as “any course of conduct by the
owner . . . [that] causes the mark to . . . lose its significance as a mark”); Already, LLC v. Nike, Inc., 568 U.S.
85, 99 (2013) (“[U]ncontrolled and ‘naked’ licensing
can result in such a loss of significance of a trademark
that a federal registration should be cancelled.” (quoting 3 J. McCarthy, Trademarks & Unfair Competition
§ 18:48 (4th ed. 2012))).
Crucially, the far-reaching exceptions espoused in
the Circuit Court’s opinion would swallow the rule and
render it little more than an academic concept. Such
relegation of the doctrine to purely theoretical status
flies in the face of the ample consideration given to it
by federal courts (including the Eighth Circuit itself
and all of its sister Circuit Courts except the First Circuit) over the last several decades. See, e.g., Tumblebus
Inc. v. Cranmer, 399 F.3d 754, 764 (6th Cir. 2005)
(“ ‘[N]aked licensing’ . . . occurs ‘[w]hen a trademark
owner fails to exercise reasonable control over the use
of a mark by a licensee,’ such that ‘the presence of the
mark on the licensee’s goods or services misrepresents
their connection with the trademark owner since the
mark no longer identifies goods or services that are
under the control of the owner of the mark’ and the
mark can no longer provide ‘a meaningful assurance
of quality.’ ”) (citing Restatement (Third) of Unfair
31
Competition § 33 cmt. b (1995)); Heaton Distrib. Co. v.
Union Tank Car Co., 387 F.2d 477, 485 (8th Cir. 1967).
While the Circuit Court acknowledges that naked
licensing will result “when a trademark owner licenses
a mark without exercising sufficient quality control
over the services provided under the mark” and that
Respondent neither imposed any contractual rights
to control nor had the ability to control the quality of
Petitioner’s services, it nevertheless concludes that no
naked licensing occurred based on the notion that Respondent could reasonably rely on Petitioner’s own, undisclosed quality-control measures because the parties
had a “special relationship.” Lawn Managers, 959 F.3d
at 911. As the dissent below aptly points out, although
a close working relationship may sometimes substitute
for formal controls, no court has ever found that a prior
working relationship was sufficient without ongoing
controls on the licensee’s quality; to the contrary, there
is a “consensus” among the other Circuit Courts that
“a prior relationship is insufficient without some indicia of control.” Id. at 915 (Kobes, J., dissenting) (citing
FreecycleSunnyvale v. Freecycle Network, 626 F.3d 509,
518–19 (9th Cir. 2010)). Thus, the Circuit Court’s opinion “extends the ‘reasonable reliance’ doctrine too far.”
Id. (“Our sister circuits have found that a licensor who
does ‘not retain any control’ has engaged in naked licensing and forfeited its rights.”) (quoting Eva’s Bridal,
639 F.3d at 791).
As made clear from Eva’s Bridal, which involved
an uncontrolled license to siblings of the licensor who
purchased a location of the business that they had
32
operated for years, there is nothing about a longstanding prior working relationship that insulates a naked
license from constituting abandonment—even where
licensor and licensee have a familial relationship. Id.
at 917. That the two businesses’ common genesis may
have resulted in them offering many of the same services and employing similar procedures is also completely irrelevant. To borrow that court’s analogy,
“Safeway could not license its marks to a corner grocery store, while retaining no control over inventory,
appearance, or business methods, just because every
grocery store is sure to have Coca-Cola and Wheaties
on the shelf.” 639 F.3d at 791.
The Circuit Court’s finding is likewise directly at
odds with a Tenth Circuit decision interpreting the exact same cases on which the Circuit Court below relies
to find that this was a “special relationship” not requiring any indicia of control. Stanfield v. Osborne Indus.,
Inc. involved an inventor licensor and manufacturer
licensee who “had no contact with each other [during
the license period] except as adversaries in litigation.”
52 F.3d 867, 872 (10th Cir. 1995), abrogated on other
grounds by Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014). “Under these circumstances, [a licensor] could not rely on [the licensee’s]
quality control as a substitute for his own control as a
licensor.” Id. Respondent and Petitioner’s relationship
during the license term in the case at bar was little
more than as adversaries in parallel state and federal
litigation, yet the majority below offers no distinguishing feature as to why this adversarial relationship
33
could still be considered “special” when the one in
Stanfield could not.
Despite observing that Respondent was not in a
position to ask to oversee the quality of work of Petitioner during the license because Randy testified he
was not on speaking terms with Linda, the Circuit
Court brushes aside Petitioner’s contention that no
close working relationship existed at the time of the
license. Lawn Managers, 959 F.3d at 911. In doing so,
the Circuit Court perplexingly declares that “there is
no evidence in the record that the companies . . . Lawn
Managers and Progressive . . . were adversarial toward one another in ways that would affect the quality
of the parties’ lawn care services.”9 Id. But even were
the parties not inextricably intertwined with their
principals—who have been locked in a years-long series of contempt proceedings in state court concerning
how they were operating their businesses—the only
evidence of any indicia of control by Respondent the
Circuit Court cites is the testimony of an employee of
Respondent that he casually, irregularly, and ostensibly without direction observed the quality of Petitioner’s work and concluded that it “seemed fine.” Id.;
contra Barcamerica, 289 F.3d at 597 (finding informal
wine tastings conducted at random, coupled with licensor’s impression that licensee’s products were “good,”
9
This is a remarkable conclusion, considering that the Complaint characterized Petitioner as “a competing business”
(App.140a, ¶ 8) and at least two of the contempt actions in state
court related to Respondent’s allegedly illegal conduct toward Petitioner (App.86a–App.125a).
34
were not a sufficient means of quality control for a vintner licensor).
But if, as the Circuit Court suggests, one licensor
employee’s purely incidental and informal observation
of a licensee’s work product constitutes sufficient “control” of that licensee’s quality, when could a licensor
ever be said to lack sufficient control? A trademark
holder could reasonably be expected to give that same
casual level of observation and more with regard to any
of its competitors, even absent a licensee relationship.
To hold that such de minimis observation of a licensee
precludes naked licensing is tantamount to a declaration that naked licensing cannot exist.
The Circuit Court’s conclusion also foregoes any
consideration of why naked licensing constitutes abandonment in the first place. As noted by both the Circuit
Court and the District Court, before the expiration of
Petitioner’s right to use the “Lawn Managers” name,
“there was constant and obvious consumer confusion,
due to the post-divorce proceedings and the resulting
. . . license agreement.” Lawn Manager, 959 F.3d at
907. Thus, regardless of the terms of the divorce orders,
this admitted fact about the effect of the orders should
have doomed Respondent’s case before it was filed. The
crux of involuntary abandonment of a trademark is
that the mark can no longer be deemed protectable because it has lost its ability to signify a particular origin
for goods or services marketed under that mark.
As the Eighth Court previously observed, “[a] registered mark is deemed abandoned . . . when an owner
35
causes the mark to ‘lose its significance as a mark.’ ”
Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ’s Church, 634 F.3d 1005,
1010 (8th Cir. 2011) (quoting 15 U.S.C. § 1127). Reinforcing this basic tenet, the Fifth Circuit underscored
why naked licensing must result in abandonment by
reasoning that “[i]f a trademark owner allows licensees
to depart from its quality standards, the public will be
misled, and the trademark will cease to have utility
as an informational device.” Ky. Fried Chicken Corp. v.
Diversified Packaging Corp., 549 F.2d 368, 387 (5th Cir.
1977). The Ninth Circuit similarly observed that
“[u]ncontrolled or ‘naked’ licensing may result in the
trademark ceasing to function as a symbol of quality
and controlled source.” Barcamerica, 289 F.3d at 596
(quoting McCarthy on Trademarks and Unfair Competition § 18:48, at 18–79 (4th Ed. 2001)). This goes to the
essence of why trademarks are protectable.
Such recitations of the public-policy justification
for naked licensing resulting in abandonment are difficult to reconcile with the Circuit Court’s acknowledgment that by 2015, when infringement is alleged to
have begun, the public’s understandable confusion
over the seemingly shared identity of the parties was
already “constant and obvious.” Respondent does not
contest that assessment, and such a result is hardly
surprising, given that Respondent allowed its competitor to use not only its name but its very identity—even
in the formal, non-marketing context of obtaining
credit and in the collection of payments by sharing the
same P.O. Box with Petitioner. A615. Further, during
36
the license period, as Petitioner masqueraded as Respondent with the imprimatur of the divorce court, the
record reflects that an explosion of confusion occurred.
Here, two highly adversarial competitors agreed,
as the Circuit Court put it, to “operate virtually the
same business for a fixed period,” intentionally keeping
the public in the dark about their separate legal existence, yet they did not establish (let alone adhere to)
any uniform quality or operating procedures. Lawn
Managers, Inc., 959 F.3d at 910. With Petitioner acting
in accordance with the Divorce Orders and impersonating Respondent, potential customers of each party
had no way of knowing that referrals or reviews they
may have received or read were likely to refer to the
work of a separately operated company that had no
common quality-control system with the company
that would ultimately service their account. Did the
“Lawn Managers” mark, then, not “cease[ ] to function
as a symbol of quality and controlled source”? Barcamerica, 289 F.3d at 596. Moreover, how can the “Lawn
Managers” mark still be said “to have utility as an
informational device” after both parties deliberately
obfuscated the information it originally conveyed?
Ky. Fried Chicken, 549 F.2d at 387.
What the Circuit Court overlooks is that by the
time Petitioner’s right to use the mark expired, the
parties had already become so inexorably and indelibly
conflated in the minds of their customers that the
mark had failed in its essential purpose of signifying
that “Lawn Managers” meant services provided under
the direction of Respondent. See Already, LLC v. Nike,
37
Inc., 568 U.S. 85, 99 (2013). A trademark holder that
has expressly bargained for an arrangement it should
have known would create such irreparable damage to
the significance of its mark should not be permitted to
avail itself of statutory remedies against its licensee
for the inevitable diminution in value of that mark
once the license has expired. Allowing it do so constitutes a departure from the purpose of the law. After all,
“[t]he trademark’s function is to tell shoppers what to
expect—and whom to blame if a given outlet falls
short.” Eva’s Bridal, 639 F.3d at 790. To allow Respondent’s flippant dereliction of its duty to guard that
function to go without consequence would set a dangerous and far-reaching precedent.10
In addition to an opinion on the validity of abandonment via naked licensing being a question of first
impression for this Court (outside of dicta), certiorari
is warranted to remove the storm clouds the Eighth
Circuit has cast over this fundamental and widely recognized doctrine and whether, as a practical matter,
the defense of involuntary abandonment continues to
be available in federal courts in light of the holding
below.
---------------------------------♦---------------------------------
10
As of this writing, the case below has already been cited in
numerous treatises and practice manuals, indicating that experts
believe this to be a significant development in the field of trademark law.
38
CONCLUSION
The petition for a writ of certiorari should be
granted.
Respectfully submitted,
DON V. KELLY
Counsel of Record
ALEXANDER M. HURST
EVANS & DIXON, LLC
Metropolitan Square
211 North Broadway,
Suite 2500
St. Louis, MO 63102
(314) 621-7755
dkelly@evans-dixon.com
ahurst@evans-dixon.com
Counsel for Petitioner
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.